Correlation Between Hong Kong and Waste Management

Can any of the company-specific risk be diversified away by investing in both Hong Kong and Waste Management at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hong Kong and Waste Management into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hong Kong Land and Waste Management, you can compare the effects of market volatilities on Hong Kong and Waste Management and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hong Kong with a short position of Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and Waste Management.

Diversification Opportunities for Hong Kong and Waste Management

0.0

Correlation Coefficient

Hong Kong  Waste Management

Pay attention - limited upside

The 3 months correlation between Hong and Waste is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Land and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management and Hong Kong is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hong Kong Land are associated (or correlated) with Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Hong Kong i.e., Hong Kong and Waste Management go up and down completely randomly.

Pair Corralation between Hong Kong and Waste Management

Assuming the 90 days trading horizon Hong Kong is expected to generate 6.39 times less return on investment than Waste Management. But when comparing it to its historical volatility, Hong Kong Land is 7.27 times less risky than Waste Management. It trades about 0.08 of its potential returns per unit of risk. Waste Management is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  14,853  in Waste Management on October 21, 2024 and sell it today you would earn a total of  6,334  from holding Waste Management or generate 42.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Hong Kong Land  vs.  Waste Management

Hong Kong Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hong Kong Land has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hong Kong is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Waste Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Waste Management is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hong Kong and Waste Management

The main advantage of trading using opposite Hong Kong and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong position performs unexpectedly, Waste Management can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Waste Management will offset losses from the drop in Waste Management's long position.

The idea behind Hong Kong Land and Waste Management pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.